At Davenport, we have been skpetical about the wide range of risky investments masqueraded as low risk which are available in the SIPP investments marketplace.

The below article as featured on investorschronicle.com is a very insightful article into the detail behind the issues facing SIPP investments.

Mis-selling of Sipps

Image by spcbrass via Flickr

Investors are being warned to be wary of alternative investments marketed by unregulated firms, including those based overseas, which are complex or look ‘too good to be true’ guaranteeing high, often double-digit, returns. Always check whether the investment is regulated in the UK by the Financial Services Authority (FSA) and whether the advice to make such an investment comes from a regulated UK adviser.

“Our experience tells us that the speculative nature of these schemes, which seem to usually involve property, bio-fuels, or land, means that they are unsuitable for the vast majority of investors and are often marketed to people who have little or no investment experience. The people selling these schemes are rarely regulated and often play on an investor’s mistrust of pensions, the volatility of stock markets, often promising double-digit, guaranteed, returns; which may seem irresistible to an inexperienced investor,” says Mr Bray.

The FSA is conducting a thematic review of Sipps, with findings to be released in the next couple of months. Fraud is one aspect the regulator will be looking at.

Mr Bray said: “Worryingly we have seen examples of people being persuaded to transfer valuable final salary or defined benefit pensions into a Sipp so that they can then make ‘alternative’ investments. The FSA’s stance is that it is rarely in the interests of a member to transfer out of such highly secure pensions and that any advice to do so should be treated with the utmost scepticism.” More reading at investorschronicle.com